- EUR/GBP gains traction for the second day in a row and rises to a two-week high on Friday.
- The BoE’s dovish outlook offsets UK data, which was mostly better than expected, and weakens sterling.
- More upbeat Eurozone industrial production figures have buoyed EUR/GBP in the last hour.
- Concerns over the energy crisis in Europe could act as a headwind against the euro and cap EUR/GBP.
The crossing EUR/GBP attracts some buying for the second consecutive session on Friday and goes up to a maximum of two and a half weeks during the first half of the European session. The cross is currently trading around the 0.8475-0.8480 area.
British pound continues to underperform amid gloomy Bank of England prospects, which in turn acts as a tailwind for the EUR/GBP cross. It is worth recalling that the UK central bank painted a particularly bleak picture last week and warned that a prolonged recession would start in the fourth quarter. This, to a great extent, offsets Friday’s UK macro releases which were mostly better than expectedwhich doesn’t help to impress GBP bulls or limit the pair’s positive intraday move.
Meanwhile, the latest leg of the strong rally witnessed over the last hour or so comes after the release of Eurozone industrial production data, which beat estimates and rose 0.7% mom in June. That said, the appearance of some buying around the US dollar could act as a headwind for the common currency. Also, concern about Europe’s energy supplywhich could drag the Eurozone economy into a faster and deeper recession, could cap EUR/GBP gains, warranting some caution for aggressive bulls.
On the latter, the supply of Russian oil to three European countries through Ukraine was suspended, since Western sanctions prevented the latter from accepting the transit fees. This makes it prudent to wait for strong follow-on buying before confirming that the EUR/GBP has formed a short-term bottom and positioning for an extension of the recent recovery move from a four-month low.
EUR/GBP technical levels
Source: Fx Street
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